If the Auditor Decides to Assess Control Risk at the Moderate

question 139

Multiple Choice

If the auditor decides to assess control risk at the moderate level in a private company audit, when in previous years the auditor set control risk at the maximum level, then tests of controls for the current year would be

• A) increased in number.
• B) reduced in number.
• C) not performed.
• D) unchanged from prior planned settings.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, calculated before the production period based on estimated costs and activity levels.

Labor Rate Variance

It's the difference between the actual cost of labor and the budgeted or standard cost of labor.

Standard Hourly Rate

A fixed rate paid or charged for one hour of labor or service.

Actual Output

The real quantity of goods or services produced by a business during a specific period.